COMMENTARY: The Not-Quite Big Three

GM's love for large vehicles, such as this 2006 GMC Yukon XL, may have something to do with the company's decline in the auto industry.

General Motors made a bit fewer than 24 percent of the cars sold in the U.S. so far this year, though folks there seem to think the worst is over. Ford is running a bit over 17 percent, excluding its foreign makes, like Land Rover, Volvo and Jaguar, which together add a percentage point of share. Every point of market share is worth 170,000 sales. Lose a point, shut another plant. Lose two points, shut two more plants.

GM's market share may well decline to 20 percent before Tailspin Tommy levels out. GM is slimming down, buying out workers, cutting costs. That's behind the stock run-up at the end of May. The vehicles are improving, no question. But here's the problem. The heart of GM business still is the big pickups and SUVs: Silverado and Sierra pickups, Suburban and Yukon XL, Tahoe and Yukon, Escalade and Avalanche and Hummer H2 SUVs. They account for almost one-third of GM's U.S. unit sales. While GM's truck designers did a fine job with new models now being rolled out, the market has changed. GM just won't sell as many as it used to, not with high gasoline prices and growing competition.

2006 Buick Lucerne + read review  |  view gallery >

The other GM problem is that its remaining vehicles, while improving, aren't sensational. The small GM pickups are fading. There are no real home runs among the cars. The new models, like the Buick Lucerne or Pontiac G6, are praised, but they don't drive the customers wild. General Motors is still trying, and rightfully so, to cut back on incentives and rebates. That pricing firmness goes hand in hand with the decline in market share to 20 percent or so. The company can't maintain the share it has now without giving away its profits.

Ford now owns 17.4 percent of the market (18.5 percent with its foreign nameplates), but its piece could fall to 16 percent or close to it. Ford is eliminating products whose past buyers may migrate to non-Ford cars when they trade in the old ones. Taurus will go, and the Freestar minivan and Town Car seem doomed, too. Ford has replacements, but I doubt that any will do as well as these did. The F-Series pickup is the heart of Ford's business, but GM and Toyota both will have new pickups this fall. The Ranger small pickup is being put to sleep, and Ford just seems to have lost its touch marketing its SUVs — Explorer, Expedition and Navigator — which were once great successes. Gas at $3 a gallon doesn't help.

Let's not forget the competition. Chrysler, with 13.7 percent of the market (another 1.4 percent for Mercedes), is holding its own. Toyota has that new pickup coming; its revised models — the Camry and FJ and Lexus — are just warming up, and there's a new hybrid Camry just out that gets 40 miles to the gallon. Nissan has a new Altima family sedan, a new Sentra small car and the smaller Versa just out. That's a lot of new products, and nobody has stopped the Koreans yet, either. We know what the Japanese are thinking. Toyota and Honda have announced that they will build yet more plants here. They figure on picking up the pieces as GM and Ford collapse.

2006 Chevrolet Silverado Hybrid + read review  |  view gallery >

It's easy to be wrong about how much business the foreigners will take away from Detroit. Tailspin Tommy always pulled out, if you remember that old comic strip. GM and Ford are getting new engines and transmissions that should help business. That new GM hybrid truck might be sensational. In three years GM will have a new Chevy Camaro and other rear-drive cars. These things will help.

True story: It was 1946. Ford was going down, disintegrating faster than it is now. Chrysler was even outselling Ford. Everything depended on the new car, due in 1948. But the new Ford boss, Ernest Breech, who came from GM, didn't like what he saw. It was too big and too heavy. Driving home up Telegraph Road in Detroit one night, he asked for help. "Show us the right way to go," he prayed.

The next morning he called his executives together. "I have a vision," he said. "We start from scratch. We'll have a crash program, as if in wartime. Any questions?" It took an extra year, but that '49 Ford saved the company.

GM and Ford can survive with the market shares I predict above, as long as the business stays strong, meaning industry sales running near 17 million. But if sales fall, to 16 million or 15.5 million, losing market share doubles the pain. At 17 million, GM's current 23.5 percent share of the market is four million. At 16 million and 22 percent of the market, a 1.5-point loss, sales are 3.5 million, meaning two more plants to shut. Another ride up Telegraph Road might not hurt.